Abstract – We examine how institutional changes that lower the barriers to successful exit influence the rate of IPO, and the initial capitalization and performance of subsequent ventures in Asian contexts. Such IPO market reforms are widespread, but their effectiveness in unclear, especially in Asia
contexts where existing institutional arrangements and cultural proclivities may work against them. To do so, we take advantage of a quasi-natural experiment in which the IPO listing requirements in Japan were dramatically reduced. Using a unique database of over 30,000 new firms incorporated after 1982, we find that IPO market reform is a powerful institutional lever
that increases the rate of IPOs, attracts capital, and improves the performance of some ventures. But it is also a blunt instrument that influences only some industries, triggers poor performance
among firms where it has an effect, and improves performance for only elite entrepreneurs. Overall, we find that IPO market reform is a complex institutional change. We conclude with contributions at the nexus of Asia, institutional theory, and entrepreneurship that indicate where
and for whom institutional change will be effective in Asia, and indicate that lowering barriers to successful exit like IPOs amplifies the performance variance among new firms.
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